The Channel Company CEO Bob Skelley: Microsoft, AWS, Google Are Having 'Positive Impact' On Partners

Public cloud providers Microsoft, Amazon Web Services and Google are having a "positive impact" across all areas of the solution provider business from profits and professional services growth to adding new customers, said Channel Company CEO Bob Skelley in a keynote address at XChange 2019.

In fact, more than 50 percent of 639 solution providers surveyed by The Channel Company's Institute for Partner Education Development (IPED) said those public cloud behemoths are driving "positive" gains across all areas of their business in both 2018 and 2019, said Skelley, who unveiled the exclusive IPED research in the address Tuesday on the evolution of the partner ecosystem.

[Related:The Channel Company CEO Bob Skelley: Public Cloud Is Having A Big Impact On Channel Landscape]

"We've got huge public cloud institutions, billions and billions of dollars in revenue, we've got solution providers seeing increased demand from customers, we see a big opportunity here for solution providers," said Skelley, who interviewed three top MSPs on stage who are driving robust sales and recurring revenue growth with public cloud providers.

The "positive impact" of those public cloud providers is showing up in every segment of the solution provider business including top line sales growth, profit growth, professional services growth, market differentiation and the all-important new customer acquisition metric, according to the IPED research.

Forty-five percent of partners said they saw "moderate to high growth" in customer demand for public cloud services over the past 12 months, with that percentage rising to 52 percent expecting "moderate to high growth" in the next 12 months, said Skelley.

The "catalyst" for that sales growth is cloud migration skill sets backed up by a full set of lifecycle services for customers, from recommending/referring to managing and running those cloud services. "Cloud migration services is the entrée to everything," said Skelley. "If you have a skill set in cloud migration services, everything in the lifecycle is open to you as a revenue stream."

With that full lifecycle set of services, the "overwhelming" number of partners are seeing the highest profits from implementing and integrating public cloud and managing and running those public cloud services, said Skelley.

Microsoft Azure, AWS and Google Cloud are now viewed as "strategic suppliers" driving significant revenue growth for partners with engagement at every level of the partner organization including sales, marketing, technical resources, and channel programs, according to the IPED survey.

Forty-four percent of partners surveyed said they see Microsoft Azure as a strategic supplier for their business compared to 34 percent for AWS and 17 percent for Google Cloud, according to the Channel Company research.

"All of these companies are working very hard to build out their channel strategy, putting more specific channel programs in place and identifying ways you can make more money," said Skelley. "They are doing a lot of things I think are going to enrich your relationship with them going forward."

One of the partners benefitting from the public cloud boom is 10th Magnitude, Chicago Ill., which this year became the first pure-play Azure partner to achieve Microsoft MSP expert status, the pinnacle of Microsoft's partner program.

Jason Rook, vice president of market development for 10th Magnitude, told XChange attendees that his company's 100 percent focus on Microsoft Azure is driving sales growth of up to 90 percent this year with a whopping 300 percent growth in Azure managed services. "We've been on a constant triple-digit growth path," he said.

10th Magnitude's all out focus on Microsoft has given the company a "true uniqueness in the market," said Rook. "Today there are 161 Azure services in general availability," he said. "There is no way that anybody can know everything about Azure, everything about AWS, and everything about [Google Cloud Platform]. That focus has really helped us with talent acquisition, talent management, and our message to the market."

Microsoft's "channel friendly pedigree" with strong independent software vendor (ISV) support has also been a key to 10th Magnitude's success, said Rook. "Microsoft has this deep history of embracing the channel," he said. "It is not just service providers like us. It is also all the ISVs that wrap around the platform. That rich ecosystem gives me more value I can go lay on top of that platform. That is one of the secrets to Microsoft's success and how Azure has been able to catch up with AWS so quickly."

Microsoft also has an enterprise focus that has been a significant competitive advantage for Azure, said Rook. "Microsoft is very enterprise-friendly," he said. "Enterprise IT folks are very loyal to that platform, and it has helped Microsoft rapidly get engaged in the enterprise. People in the enterprise know Microsoft has a rich ISV ecosystem with lots of tools and value add. That has helped accelerate their momentum. We are just riding that wave."

Rook told partners that one of the keys to succeeding in public cloud is building your own cloud migration talent. "All of the existing Azure talent is gone," he said. "There is no more Azure talent."

One of the key ingredients of 10th Magnitude's "secret sauce" is an intensive one-week program to aimed at getting VMware technical talent to translate those skill sets to Azure. "By Friday afternoon, those employees know how to use ASR [Azure Site Recovery] and Kubernetes," he said.

Michael Lomonaco, director of marketing and communications for OST, Grand Rapids, Michigan, one of the top cloud providers in the country, said public cloud growth for OST has soared over the last two years. "Eighteen to 24 months ago, it was a pretty heavy IT conversation. Now we are seeing significant impact selling across the organization into marketing and operational areas outside of IT," he said.

OST, in fact, is seeing robust double-digit sales growth with both Microsoft and AWS. "AWS and Microsoft are extremely strategic for us," he said. "They are a big part of our future going forward. The value they are bringing for us and our customers is significant. We are seeing amazing, amazing growth with both AWS and Microsoft."

OST's skills in both Microsoft and AWS are expanding its market reach, particularly in the IoT market where OST is only one of 14 partners globally that have achieved the AWS IoT competency. "In the IoT space with our consumer and durable goods manufacturer customers, AWS makes a lot of sense because they have a whole channel play across Amazon," he said

One of the benefits that the public cloud providers have brought to OST is the ability to have cloud conversations across the entire organization, not just IT, said Lomonaco. "IT is certainly in the room, but the broad impact to the organization is brought to bear as we work on cloud strategies and migrations through our Cloud Guidance workshops," he said.

Lomonaco told partners looking at getting into the public cloud market to realize it is going to require deep investments across the entire organization. "It is much more than your technical side," he said. "You need to have sales, marketing, and operations talent. Make sure you have a really good understanding of what your partner is asking and requiring of you."

Infinite IT, a Toronto, Ontario solution provider that transformed into a cloud-focused MSP in 2014, has driven astronomical growth in recurring revenue with its cloud focus, said Infinite IT CEO Joe Ussia.

In fact, Ussia said that recurring revenue growth has soared from $5,000 a month early on its transformation to $100,000 a month with an eye on $250,000 a month this year. The profit margin on those recurring revenue services has soared from just five percent to 32 percent, said Ussia.

What's more, 75 percent of Infinite IT's business is now made up of recurring revenue services. "What we have found is the more cloud services we pushed to our customers the more they adopt and the more that they consume," he said. "That had a ripple effect on our company. We got more services revenue. We had greater stickiness with our customers. It's a better experience."

The recurring revenue focus has made Infinite IT – which no longer sells servers – a stronger business and made running the business more enjoyable, said Ussia. "The first of the month is my favorite day because I get the report that shows our recurring revenue with the invoices going out," he said. "I say- That is awesome. We just hit our numbers."

The biggest hurdle to migrating customers to the public cloud is educating them, said Ussia. "The challenge with customers is getting them to wrap their head around, 'why cloud?,'" he said. "They say, 'We've been on-premises all this time? Why do we need to move?'"

Infinite IT's sales strategy is to get a new customer to commit to a single cloud service and start that customer on the cloud journey. "That journey has been the secret on how we get them to grow and adopt more and more services," Ussia said.

Ussia's advice to partners who do not have a cloud practice is to team up with a cloud-focused MSP. "Someone that you may have thought was your competitor down the street today could be your biggest ally," he said.

Skelley, for his part, urged partners to be an active "voice" encouraging the public cloud providers to become even more focused on a channel go-to-market strategy. "They are still in the early stages when it comes to adopting channel relationships and learning how to leverage and work with solution providers to drive their strategies forward," he said. "Be patient, give them time, but most importantly be a voice. Make sure when you see things that are needed in their program, whether its management, profitability model or in the products and services they are offering, that you are sharing that so they start to evolve and build a better, more robust channel program for you."